Will Silver Make New 2017 Lows?

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Includes: AGQ, DBS, DGL, DSLV, GLD, IAU, SGOL, SIVR, SLV, SLVO, USLV
by: Scot Macdonald

Summary

Our proprietary Variable Changing Price Momentum Indicator (VC PMI) weekly gold analysis forecasts that gold will move the extreme above the mean into the $1281 to $1292 range short term.

The monthly VC PMI gold analysis shows that gold is likely to move into the $1298 to $1326 extreme above the mean in November.

The VC PMI silver weekly (mean reversion) report shows that silver will probably test the September highs of $18.26.

The monthly VC PMI silver (mean reversion) report predicts silver moving into the $17.34 to $18.00 levels.

We are getting a strong confirmation based on an intermediate- and long-term supply and demand basis (mean reversion) that the gold and silver markets are about to break out to the upside with the possibility of challenging the September highs by the end of 2017.

The VC PMI Automated Algorithm

We use the proprietary Variable Changing Price Momentum Indicator (VC PMI) to analyze the precious metals markets. The primary driver of the VC PMI is the principle of reversion to the mean, which is combined with a range of analytical tools including fundamental logic, wave counts, Fibonacci ratios, Gann principles, supply and demand levels, pivot points, moving averages, and momentum indicators. The science of Vedic Mathematics is used to combine these elements into a comprehensive, accurate and highly predictive trading system.

Mean-reversion trading seeks to capitalize on extreme changes in the price of a particular security or commodity, based on the assumption that it will revert to its previous state. This theory can be applied to both buying and selling, as it allows a trader to profit on unexpected upswings and buy low when an abnormal low occurs. By identifying the average price (the mean) or price equilibrium based on yesterday's supply and demand factors, we can extrapolate the extreme above this average price and the extreme below it. When prices trade at these extreme levels it is between 90% and 95% probable that prices will revert back to the mean by the end of the trading session. I used this system to analyze the gold and silver markets.

Gold - Weekly

As we look at the proprietary VC PMI gold weekly S&D report, we can see that the sell 1 level or the extreme above the mean for the week of $1281 has been activated, since the market traded above $1281. In crossing the mean or average price of $1273, we have been able to anticipate that the supply and demand levels for the rest of the week will be $1281, which will be the first target of supply, and $1292 (sell 2), which is the upper end of the extreme above the mean of $1273 or the weekly average price. A weekly close below the mean or average price of $1273 would negate this analysis to neutral.

Weekly Gold S&D Levels

Gold

As we look at the VC PMI gold S&D monthly report, we can see that the sell 1 level or the extreme above the mean for the month of $1298 has been activated, since the market traded above $1281. In crossing the mean or average price of $1281, we have been able to anticipate that the supply and demand levels for the rest of the month will be $1298, which will be the first target of supply, and $1326 (sell 2), which is the upper end of the extreme above the mean of $1281. A monthly close below the mean of $1281 would negate this analysis to neutral.

Monthly Gold S&D Levels

Silver

Our bullish S&D analysis for silver is based on three confirmations of previous lows: October 6 at $16.3450; October 7 at $16.0950; and October 27 at $16.61. Technically speaking, this kind of technical formation is considered a triple bottom. If we include the low of $15.14 made on July 7, it would make this the fourth time these support (demand) levels have been tested. A weekly close above $17.10 will re-enter the weekly uptrend and validate a potential rally back up to test the September (supply) highs of $18.29.

Silver

As we look at the weekly S&D VC PMI automated algorithm for silver, we've identified for this week buy 1 levels activated at $16.57. A secondary level of $16.31 was activated on October 6.

These events fit into a perfect alignment and show a harmonic timing between the weekly and monthly VC PMI S&D indicators. This alignment is one of the highest probability factors that we use to confirm that we have a better than 90% probability that reversion to the mean will occur to the extreme above the mean. This means that prices are likely to move above $17.51 for the weekly targets (sell 2 level). We have already accomplished the first target of $17.17 (sell 1 level). The market by breaking out above the sell 2 level of $17.51 will be breaking out of this weekly pattern, confirming the possibility that the September highs of $18.26 (supply) are going to be tested. For downside protection, I recommend using the weekly close below (buy 2 level) of $16.31 to go neutral.

Silver Weekly S&D Levels

Silver Monthly S&D Levels

As we look at the VC PMI silver monthly report, we can see that the sell 1 level or the extreme above the mean for the month of $17.34 has been activated, since the market traded above $16.85. In crossing the mean or average price of $16.85, we have been able to anticipate that the supply and demand levels for the rest of the month will be $17.34, which will be the first target of supply, and $18.00 (sell 2) which is the upper end of the extreme above the weekly mean of $16.85. For downside protection, I recommend using a monthly close below the mean of $16.31 to go neutral.

Silver Monthly S&D Levels

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.